Islamabad: Pakistan’s central bank will auction a three-year local currency sukuk, or Islamic bond, more than a year after it last issued such an instrument, adding a much needed liquidity management tool for domestic Islamic banks.
The central bank did not give a target size for the sukuk, which will be backed by motorway assets in Punjab province and use an ijara structure, a shariah-compliant sale and lease-back contract. No date for the sale was announced.
Pakistan issued a Pakistan Rs43bn ($438m) three-year sukuk in March last year, using a similar structure.
A local currency sukuk would be welcome by the country’s five full-fledged Islamic banks and 15 others offering Islamic finance services, as a key tool to help manage their short-term liquidity needs. Net investments made by Pakistan’s Islamic banking industry declined by 17.7 percent or Rs76bn in the 12 month period ending in March. This was mainly due to a lack of any new government issuance of sukuk, the central bank said in its latest Islamic banking bulletin. As of March, Islamic banking assets posted a 20 percent growth year on year, while their net financing and investment ropped 0.7 percent in the same period. Reuters
